Early Resolve: Obama Stand In Auto Crisis

Published: April 29, 2009

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Mr. Obama had often said that he would focus on the hardest decisions, leaving easier calls to deputies. The decision that generated the biggest headlines fell in that easier category: He readily accepted a recommendation to push out G.M.'s chief executive, Rick Wagoner, and order the new leadership to produce more aggressive plans to save their company, according to Mr. Geithner, Mr. Summers and other aides.

A half-hour into the meeting, an aide entered the Oval Office and slipped Mr. Obama a note informing him another meeting was to begin. The president told advisers he needed more time to decide Chrysler's fate. He then headed off for a day consumed by a new strategy for Afghanistan, a threatened rocket launch by North Korea and the evacuation of a flooded Fargo, N.D. (''What is this, a 'West Wing' episode?'' Mr. Axelrod recalled asking Mr. Emanuel.)

At 6 p.m., the president reconvened his auto advisers in the Roosevelt Room. By then, Mr. Obama had reached what Mr. Geithner called ''a fork in the road judgment'' on Chrysler that would not be popular with his union backers or his Michigan allies. ''We were not prepared to spend what they needed to stand alone, because they were not viable,'' Mr. Geithner said.

The question became whether to let Chrysler slip into bankruptcy or to give it another month to finalize a life-saving alliance with Fiat, participants said. Some argued to let Chrysler go. Others argued a bankruptcy would ripple beyond the company to its extensive network of suppliers and dealers.

No longer was the discussion focused on using the crisis to build a clean-energy auto industry. Instead, the issue was more fundamental: Was survival even an option? Advisers agonized over whether to make clear bankruptcy was possible even if the companies were given more time. Just uttering ''the B-word,'' as some called it, could scare the country.

Sitting at a long conference table, scratching notes on briefing papers, Mr. Obama peppered advisers with questions and solicited opposing opinions, according to people in the room: How many jobs would a bankruptcy cost? How much exposure would taxpayers have? Would keeping Chrysler afloat just add to the inventory of unsold cars?

''He wants to know all the bad things, all the risks, and all the dark things,'' Mr. Geithner said.

As is his habit, Mr. Obama called on people who had not spoken and pressed those who sounded tentative. ''When he feels he's getting thoughtful answers, he tends to move on,'' Mr. Summers said. ''When he feels like he's not getting thoughtful answers, he becomes more concerned.''

After 75 minutes, Mr. Obama determined he would give the companies one last chance while making clear bankruptcy awaited should they fail. Either way, Mr. Wagoner was out.

With his chief political aide, Mr. Axelrod, and chief spokesman, Robert Gibbs, Mr. Obama sorted through the political implications. Mr. Obama and his team had long believed that the public was hungry for greater regulation. Mr. Obama's popularity also gave him room to maneuver.

Yet Americans have traditionally shown uneasiness with government involvement in the private sector. Mr. Axelrod said that if anything, the plan had more political risk than reward.

With supreme faith in his ability to explain anything to the country, Mr. Obama shrugged off concerns and said he would openly signal that bankruptcy was a possibility, advisers recalled.

The next morning, Mr. Rattner pulled Mr. Wagoner aside before a meeting at the Treasury Department and told him to resign immediately. With no contact from Mr. Obama, as far as advisers know, Mr. Wagoner ended his 31-year career at G.M., although the news was not announced for days.

When Mr. Obama got on the phone with the Michigan delegation two nights later to inform them, he did not invite debate. ''We weren't asked about it,'' Carl Levin recalled. ''We were notified.''

At the suggestion of Senator Debbie Stabenow, another Michigan Democrat, Mr. Obama revised his speech the next day to praise advances at Buick and Chevrolet. But he did not flinch from what he was doing. Thirty years earlier, Jimmy Carter left no fingerprints when he pushed out the head of Chrysler. Mr. Obama had no problem with anyone knowing he had toppled a giant.

''His feeling,'' Mr. Axelrod said, ''was, you do it, you own it.''

Playing Poker, No Bluffs

For good or ill, Mr. Obama has done a lot in his first 100 days, and now owns a lot. The auto crisis forced him to look at options once unthinkable, and, like many challenges, remains unresolved.

In terms of leadership style, Mr. Obama at times has seemed like a cross between his two most recent predecessors -- intellectually curious, philosophically flexible and eager for input like Bill Clinton, while disciplined, willing to delegate and comfortable with bold decisions like George W. Bush.

Unlike Mr. Bush, who preferred that his memos be kept to two pages, Mr. Obama has not trusted instinct during the auto-industry crisis so much as conduct a law school-style review of his options. Unlike Mr. Clinton, who was famous for making phone calls late at night without his aides knowing, Mr. Obama generally did not reach out independently to auto executives, union leaders or Congressional allies.

Yet in his first three months, he has struggled to avoid the isolation that has beset so many predecessors. Upon taking office, Mr. Obama set up a group of outside economic advisers to provide him an array of opinions. ''He doesn't want to get insulated,'' said one member, Richard L. Trumka, the secretary-treasurer of the A.F.L.-C.I.O.

But as the auto-industry talks accelerated, Mr. Obama relied mainly on his core advisers. Mr. Geithner was the only cabinet secretary in the room when the president made his decision. The outside economic panel has not formally met with Mr. Obama since its February inception, though its chairman has.

Mr. Obama is learning fast that he cannot be all things to all constituencies, and the labor leaders who did so much for him during the campaign sometimes chafe at his approach. The U.A.W. last week called on members to send e-mail messages to the White House demanding that it ''stand up for the interests of workers and retirees in these restructuring negotiations.''

As with his predecessors, strength at times can be weakness. Mr. Obama's confidence has been a powerful asset at a time of national anxiety, even as close advisers acknowledge that it risks blinding him to the drawbacks of some decisions. In the end, Mr. Obama is gambling that his judgment is the right one to salvage an industry at the heart of America's economic self-image.

''At this point, the administration is just playing poker,'' Mr. Dingell said. ''If he gets the damn loans and saves the industry, I guess I won't be able to complain.''

And if Mr. Obama does not, the next 100 days promise to be even more challenging than the first.

PHOTOS: The Brain Trust: President Obama with Treasury Secretary Timothy F. Geithner, left, and Lawrence H. Summers, his economic adviser, in March. (PHOTOGRAPH BY DOUG MILLS/THE NEW YORK TIMES); Defending Their Constituents: Representative John D. Dingell and Senator Carl Levin of Michigan scolded Mr. Obama as talking down the auto industry. (PHOTOGRAPH BY FABRIZIO COSTANTINI FOR THE NEW YORK TIMES); 'What are these guys thinking?': President Obama was incredulous that the chief executives of Chrysler, Ford and G.M. flew to Washington on corporate jets. (PHOTOGRAPH BY CHIP SOMODEVILLA/GETTY IMAGES) (pg.A14)